If one stayed the course, 2025 was a great year for international investing, the MSCI relevant index1 was up 33.11% versus a 17.75% return for their US index.
Among developed markets, Europe stood out with a 36.25% return for the year, although there was a great deal of variation among the markets. Denmark was the only country in negative territory; weighed down by Novo Nordisk, its index return was -12.88%. On the other hand, Spain’s index, heavily weighted by banks, was up 83.57%. Investors also appreciated the country’s strong economic fundamentals and lower tariff exposure. Generally, European financials, industrials and healthcare sectors did well, while real estate, distillers, chemical and autos lagged.
Financials along with basic material and energy stocks also buoyed the Canadian stock market, which was up 37.38% for the year.
MSCI’s Pacific index was up 23.63%. Benefitting from a strong IPO market and inflows from China, the Hong Kong index was up 34.83%. Japan, the largest component of the index, was up 25.05% as investors responded to its resilient economy and corporate governance reforms. New Zealand’s economic outlook and stock market improved towards the end of 2025, but its index was still down .16% for the year.
In aggregate, emerging markets also did well; MSCI’s index was up 34.36%. Increased investment and consumption were credited for the rise in emerging European markets; that index was up 56.17% for the year; whereas, strong commodity prices and good domestic demand drove the Latin American index up 55.67%. The EM Asia index was up 32.94% led by tech-heavy Korea, which was up 100.76%. Indonesia was the only market reported in negative territory, the index was down 1.66%. Geopolitical tensions and decelerating economic growth contributed to a muted Indian market, whose index was up only 4.29%.
The competitive performance of our international portfolios reflected many of the themes explored above. One of the largest detractors of our International Value Portfolio was Adidas, over concerns of the impact of tariffs on production costs in Indonesia and on weakening demand in the US. Stocks in Indian technology providers Infosys and Wipro also retreated significantly. Financials were strong contributors including UK’s Prudential PLC and Brazil’s Banco Bradesco. We don’t have access to Korean stocks, but the portfolio held a significant position in the iShares MSCI South Korea ETF, which was one of the best performing investments.
Spark, a New Zealand telecom stock and distiller Diageo had negative performance in our International Income Equity Portfolio, whereas Canadian National Railway was relatively flat. For this portfolio also, financials, such as UK’s Lloyds and Barclays, did very well. France-based telecommunications company, Orange, was among the best performers.
I miss Jimmy Buffett. He warned of events that might happen, but didn’t tell you what to do. For instance, I still don’t know where to go when the volcano blows, or when there are fins to the left and right of me or when I want a cheeseburger in paradise. I don’t know what happened to the couple on the lovely cruise whose “moments are shared by few.” Did they go on another cruise, get married and have babies that went on cruises or did they bid goodbye and never see each other again?
I don’t know, too, what is going to happen in the equity markets in 2026. It would be unethical to say I did, but I will share some of my expectations.
AI will be an important part of productivity improvements across many industries and for many companies. There seems to be some disconnect, however, between the valuation of companies involved in the “AI supply chain” and their earnings potential. Investor persistence can last a long time, but eventually the market will sort out the winners and the losers.
We can hope that peace breaks out around the world, but geopolitical discontent is likely to continue and probably get worse. Investors should be cautious about where they are investing, but not afraid. Due diligence can turn up some great opportunities.
Based on the most recent published data, international equity markets in aggregate are trading at a significant discount to the S&P 500; this discount holds across most sectors. International equities, in my opinion, still offer a good combination of value and diversification.
As we start 2026, your Bastion Fiduciary portfolio managers are already hard at work evaluating our current holdings and look for good investments. Please check out https://lastbastion.com for insights from John Rotonti, the manager of the Bastion Industrial and Infrastructure Portfolio, and Cale Smith, the manager of the Bastion Energy Portfolio and ETF. On the Bastion Boards page https://boards.lastbastion.com, please check out the Financial Planning Corner for Kirk Kinder’s themes for 2026.
The whole Bastion Fiduciary Team wishes for you a Happy and Healthy 2026.
1 Unless otherwise noted, performance numbers are for the year 2025 based on the relevant MSCI index data viewed on January 2, 2026.
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